Bryan Caplan  

Ghost World and Zombieland

Dennis Hastert and Colorado po... NGDP futures targeting means n...

I'm embarrassed to admit that I only recently got around to reading Lant Pritchett's Let Their People Come: Breaking the Gridlock on Global Labor Mobility.  The full text is free and packed with goodness, but I learned the most from Pritchett's chapter on "ghost" versus "zombie" economies.  Key idea:
Large and persistent declines in labor demand in a region, perhaps because of technical changes in agriculture or changes in resources, create two possibilities, which I call "ghosts" or "zombies." If labor is geographically mobile and hence labor supply is elastic, then large declines in labor demand will lead to large outward migration--the process that created "ghost towns" in the United States. However, if labor demand falls in a region and labor is trapped in that region, by national boundaries for instance, the labor supply is inelastic and all the accommodation has to come out of falling wages. A region that cannot become a ghost (losing population) becomes a zombie economy--the economy might be dead, but people are forced to live there.


Is this a big deal in the real world?  Yes!

There are three sources of evidence, which together suggest that there are typically large shifts in the desired populations of regions. Though it is extremely difficult to separate out which of these are shifts in just an "unconstrained desired" population (due to remediable factors like policies, or, optimistically, institutions) and which are shifts in "optimal" populations, there is some evidence from comparing regions of countries (which share many policies and institutions) that some large fraction of the shifts in desired populations are also shifts in optimal population. These shifts in desired population are accommodated differently depending on the conditions for labor mobility. The three empirical examples are (1) regions of the United States, (2) comparisons of within-country versus cross-country variability of population and output per person growth rates, and (3) population versus  output variability in history.
Peek at evidence on (1):
I have assembled five regions of the United States, which, since I created them, I will name: Texaklahoma (Northwest Texas and Oklahoma), Heartland (parts of Iowa, Missouri, Kansas, and Nebraska), Deep South (parts of Arkansas, Mississippi, and Alabama), Pennsylvania Coal and Great Plains North (parts of Kansas and South Dakota). Even with the constraint of contiguity and (mostly) convexity, one can assemble large territories that have seen substantial absolute population decline. The Great Plains North is a territory larger than the United Kingdom, and its population declined 28 percent from 1930 to 1990. Its current population is only a bit more than a third the population it would have been if its population growth had been at the rate of natural increase. The Texaklahoma region is bigger than Bangladesh and is now only 31 percent the population size it would have been in the absence of outmigration.
Peek at evidence on (2):


Peek at evidence on (3):
The nineteenth century was truly an "age of mass migration" (Hatton and Williamson 1998), because many of the "areas of recent settlement" had open borders with respect to immigrants (at least with certain ethnic and national origins). It was also an era of rapid reductions in transport costs and shifts toward freer trade in goods, open capital markets, and massive movements in capital--the first era of globalization. Hence, this period is an interesting example of the question: "How would we expect geographically specific shocks to be accommodated in a globalizing world?" Comparing Ireland to Bolivia highlights the obvious: that nearly all developing countries with negative shocks have seen their populations continue to expand rapidly, while when there was freer labor mobility in the international system, labor movements accommodated negative shocks
Bottom line: If you can believe that huge areas within many countries are optimally empty (or nearly empty), the same could be true for entire countries.  Ghost countries, like ghost towns, won't look pretty.  But this is a classic case of "Is a place still ugly if nobody sees it?"  Immigration restrictions turn ugliness few people ever see into ugliness millions experience every day.

COMMENTS (6 to date)
E. Harding writes:

So Japan is a ghost, not a zombie economy? Isn't this just an argument for immigration restriction for rapidly aging rich countries?
Also, most of Africa is a zombie economy.

"Comparing Ireland to Bolivia highlights the obvious: that nearly all developing countries with negative shocks have seen their populations continue to expand rapidly"
-One big exception: Eastern Europe.

Bedarz Iliaci writes:

The nineteenth century was truly an "age of mass migration" because many of the "areas of recent settlement" had open borders with respect to immigrants (at least with certain ethnic and national origins).

With the said proviso, one would find that a great many countries have open borders even now. Eg Israel is open-borders for Jews, India for Hindus, Germany for Germans, Russia for Russians.

Conscience of a Citizen writes:

Far and away the chief "shock" to most really poor countries is simply population growth (enabled, in part, by the transfer of food and medicine from more advanced countries).

If you look at fast-growing countries in Africa, for example, you don't see "persistent decline in labor demand" due to, e.g., silver mines playing out. Instead you see persistent increase in labor supply due to human fertility. The subsequent picture-- underemployment and low wages-- may look similar, but if that is a problem it cannot be solved by migrating a small workforce from a declining region to a growing one-- because the workforce is not small and-- for example in the empirical case of sub-Saharan Africa, which has grown at 4.4% annually for the last 20 years*-- the afflicted region is not necessarily declining.

Pritchett's book may be very interesting, but studying internal migration in first- or even second-world countries does not tell us much about the prospects for international migration from third- to first-world countries in the 21st Century.

(If poor countries put their surplus into industrial capital accumulation instead of population growth their people would become much richer without moving anywhere, since per-capita income is determined by capital per worker.)

*Higher than the world-average growth rate for the same era.

Hazel Meade writes:

And then there are other things like welfare programs that keep people living in an area long past the time when they would otherwise migrate away. See Detroit.

mico writes:

The trouble is that countries are usually successful or unsuccessful because of their people, not exogenous factors.

The key point you never engage with or even acknowledge in your discussion of the (very real) opportunities for mutually beneficial contractual relationships with massive numbers of third world immigrants is that contract rights are inevitably bundled with political power in practice.

E.g. Antarctica writes:

[Comment removed pending confirmation of email address. This is your final notice. We have attempted to contact you previously. Email the to request restoring this comment and your comment privileges. A valid email address is required to post comments on EconLog and EconTalk.--Econlib Ed.]

Comments for this entry have been closed
Return to top